Bond Ratio

DEFINITION of 'Bond Ratio'

A financial ratio that expresses the leverage of a bond issuer. The bond ratio formally expresses the ratio of the bond issued to the company's capitalization as a percentage. The ratio is equivalent to the total amount of bonds due after one year divided by that same amount plus all outstanding equity.

BREAKING DOWN 'Bond Ratio'

Any bond ratio that exceeds 33% generally indicates above average leverage. The typical exception to this applies to utility companies, which normally have ratios at this higher level. The bond ratio is one of many ratios that are used to examine the financial health of bond issuers.

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